FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
63
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(l) Financial guarantees
The Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These guarantees are
financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal
or interest payments when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costs.
Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’
borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the
unamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to
bank.
Intra-group transactions are eliminated on consolidation.
(m) Borrowings
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised
cost. Interest expense calculated using the effective interest method is recognised over the term of the borrowings.
.
Borrowings which are due to be settled within twelve months after the balance sheet date are included in current
borrowings in the balance sheet even though the original term was for a period longer than twelve months and
an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the balance sheet
date and before the financial statements are authorised for issue. Other borrowings due to be settled more than
twelve months after the balance sheet date are included in non-current borrowings in the balance sheet.
(n) Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using
the effective interest method.
(o) Taxes
Current income tax for current and prior periods is recognised at the amounts expected to be paid to or recovered
from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the
balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from
the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither
accounting nor taxable profit nor loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries,
except where the Group is able to control the timing of the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be
available against which the deductible temporary differences and tax losses can be utilised.
